S&P upgrades Pakistan’s rating to ‘B’ on economic progress

S&P Global Ratings has upgraded Pakistan’s long-term sovereign credit rating from ‘B-’ to ‘B’, citing improvements in economic stability, foreign exchange reserves and reform progress.

The global rating agency maintained a stable outlook for Pakistan, indicating expectations that the country’s economic recovery will continue if current policies and reforms remain in place.

S&P said the rating upgrade reflects stronger institutional capacity and Pakistan’s progress in implementing reforms under the International Monetary Fund’s (IMF) programme.

The agency highlighted that the $7 billion IMF Extended Fund Facility (EFF) has played an important role in improving economic management, supporting fiscal reforms and rebuilding external financial buffers.

According to S&P, Pakistan has achieved most of the IMF programme targets so far, which has helped maintain the flow of financial assistance and improve investor confidence.

The rating agency also pointed to a major improvement in Pakistan’s foreign exchange reserves. It said reserves increased to around $25.3 billion, including gold holdings, by the end of last month. This is a significant rise compared with the low level of around $6.7 billion recorded in December 2022.

S&P said the improved reserve position provides greater capacity to manage external payments and cover upcoming foreign debt obligations.

The agency added that continued support from international partners, multilateral institutions and access to global financing markets would help Pakistan strengthen its external position.

S&P projected further improvement in Pakistan’s fiscal performance, saying the government deficit could decline to around 4% of GDP by fiscal year 2027. This compares with nearly 8% during the economic difficulties faced in 2022 and 2023.

The agency also noted that economic reforms, fiscal discipline and improved financial management could help Pakistan achieve sustainable growth in the coming years.

However, S&P warned that a slowdown in reforms, increased fiscal pressures or worsening external conditions could create risks for the country’s future rating.

The agency said Pakistan could receive another rating improvement if it continues reducing fiscal deficits, increasing revenues, lowering financing costs and strengthening external economic indicators.